Chapter 01 - An Introduction to the Fundamentals of Dynamic Business Law and Business Ethics
Chapter 1: An Introduction to the Fundamentals of Dynamic Business
Law and Business Ethics
1. CHAPTER OVERVIEW
Chapter 1 lays the foundation for the textbook. The textbook emphasizes ways in which business
law intersects with the six functional areas of business. Throughout the textbook, the authors will
encourage students to “connect to the core,” and remember the ways in which law intersects with
other areas of study, including corporate management, production and transportation, marketing,
research and development, accounting and finance, and human resource management.
This manual supports the “connecting to the core” theme by giving ideas for assignments that
encourage students to integrate their business law knowledge with knowledge they are acquiring
from their other business classes. The manual also encourages professors to improve their
teaching skills. Finally, the manual suggests teaching ideas for both beginning and experienced
teachers.
2. LEARNING OBJECTIVES
After reading this chapter, students will be able to answer the following questions:
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What is business law?
How does business law relate to business education?
What are the purposes of law?
What are alternative ways to classify law?
What are the sources of law?
What are the various schools of jurisprudence?
3. LECTURE NOTES WITH DEFINITIONS
a. In the news…
Teaching tip: For each chapter, consider asking students to relate current news items to material
from the chapter.
In addition to ideas students come up with on their own, consider weaving in news stories
provided by the McGraw-Hill. Stories are available via a McGraw-Hill DVD, and on the
publisher’s web site.
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in
whole or part.
Chapter 01 - An Introduction to the Fundamentals of Dynamic Business Law and Business Ethics
For Chapter One, McGraw-Hill offers the following stories:
“Smoking Ban: Tobacco Tyrants: Gone Too Far? Many States Are Putting Stronger Restrictions
on Where You Can Smoke”
 Have states gone too far in banning smoking?
 Whose interests are state legislatures looking out for in banning smoking?
“College Officer Dealings With Lenders Scrutinized.”
 Should regulators take a more careful look at college officers?
 Why created changes in the ways college officers interact with lenders?
b. What is business law?
Business law consists of the enforceable rules of conduct that govern the actions of buyers and
sellers in market exchanges.
c. How does business law relate to business education?
Business law applies to the six functional areas of business:
 Management
 Production and transportation
 Marketing
 Research and development
 Accounting and finance
 Human resource management
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d. What are the purposes of law?
Providing order
Serving as an alternative to fighting
Facilitating a sense that change is possible
Encouraging social justice
Guaranteeing personal freedoms
Serving as a moral guide
e. What are alternative ways to classify law?
One way to classify law:
Private law involves disputes between private individuals or groups.
Public law involves disputes between private individuals or groups and their government.
A second way to classify law:
Civil law is the body of laws that govern the rights and responsibilities either between persons or
between persons and their government.
Criminal law is the body of laws that involve the rights and responsibilities an individual has
with respect to the public as a whole.
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© 2019 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or
distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in
whole or part.
Chapter 01 - An Introduction to the Fundamentals of Dynamic Business Law and Business Ethics
Teaching tip: Ask students to give an example of a fact situation that led to both criminal and
civil lawsuits, e.g., the O.J. Simpson trials.
f. What are the sources of law?
Sources of business law are:
1. Constitutions
Constitutional law refers to the general limits and powers of governments as stated in their
written constitutions.
2. Statutes or legislative actions
Statutes or legislative actions refer to the assortment of rules and regulations put forth by
legislatures.
3. Cases
Case law (or common law) is the collection of legal interpretations made by judges.
Precedent is a tool used by judges to make rulings on cases on the basis of key similarities to
previous cases.
Stare decisis is a principle stating that rulings made in higher courts are binding precedent for
lower courts.
Teaching tip: The first time your students encounter an appellate case in the readings, show
them what stare decisis looks like in the context of a real case.
4. Administrative law
Administrative law is the collection of rules and decisions made by administrative agencies to
fill in particular details missing from constitutions and statutes.
5. Treaties
A treaty is a binding agreement between two states or international organizations.
6. Executive orders
An executive order is a directive that comes from the president or state governor.
g. What are the various schools of legal interpretation?
Some schools of legal interpretation include:
 Identification with the Vulnerable—emphasis on fairness and looking out for those
with the least power.
 Historical School/ Tradition—emphasis on the use of traditions and stare decisis.
 Legal Realism—judges consider context such as social and economic conditions.
 Cost-benefit Analysis—emphasis is on assigning monetary values to costs and benefits
of the law in order to make calculations to maximize the ratio of benefits to costs.
Teaching tip: Consider using “The Case of the Speluncean Explorers (link below) to make the
schools of jurisprudence come alive.
h. Appendix on Critical Thinking and Business Law
Critical thinking includes the application of evaluative standards to assess the quality or the
reasoning being offered to support the conclusion. Critical thinkers will follow this pattern of
careful thinking when they read an argument:
1. Find the facts.
2. Look fore the issue.
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© 2019 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or
distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in
whole or part.
Chapter 01 - An Introduction to the Fundamentals of Dynamic Business Law and Business Ethics
3. Identify the judge’s reasons and conclusion.
4. Locate in the decision the rules of law that govern the judge’s reasoning.
5. Apply critical thinking to the reasoning. Evaluate the reasoning.
 Look for potential ambiguity.
 Consider the strength of analogies.
 Check the quality of the judge’s reasoning.
 Decide whether important information is missing.
 Consider the possibility of rival causes.
4. TEACHING SKILLS: BLOOM’S TAXONOMY SETS THE STAGE TO
THINK ABOUT THE KINDS OF QUESTIONS TO ASK YOUR STUDENTS
Benjamin Bloom, in his Taxonomy of Educational Objectives,* developed a hierarchy of
cognitive functions. His work sets the stage for teachers to understand why it is important to
think carefully about the kinds of questions they ask in class.
The Objective
Knowledge
Lowest level of learning and is mostly memory.
The student recognizes and recalls information.
Comprehension
Lowest level of understanding. The student
paraphrases or explains something.
Application
Student demonstrates her understanding of
abstract rules, principles, or generalizations by
using them to solve life-like problems.
Analysis
Student breaks down a communication to
discover the hidden structure as well as
assumptions.
Synthesis
Student creatively combines elements and parts
to form a whole new structure.
Evaluation
Highest level of learning. Student makes a
critical judgment about the value of the
Sample questions
 What is business law?
 What are the four elements of a negligence
claim?
 What is your understanding of the concept
of stare decisis?
 What does your textbook mean by
deontology?
 How would a natural law thinker respond
to this particular fact pattern?
 Use a particular case rule to determine
whether the plaintiff will be successful in
her claim.
 Provide the reasoning for the following
statement: All contracts do not need to be
in writing to be enforceable.
 Break down a particular judge’s opinion to
understand the assumptions the judge is
making.
 Explain how two particular schools of legal
interpretation are related.
 Make a connection between duress and
insanity.
 Identify and explain a reasoning flaw in the
judge’s argument.
 Evaluate the following statement:
* BENJAMIN BLOOM, TAXONOMY OF EDUCATIONAL OBJECTIVES: THE
CLASSIFICATION OF EDUCATIONAL GOALS (1954).
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in
whole or part.
Chapter 01 - An Introduction to the Fundamentals of Dynamic Business Law and Business Ethics
communication.
Arbitration and mediation are better forms
of dispute resolution than litigation.
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in
whole or part.
Chapter 01 - An Introduction to the Fundamentals of Dynamic Business Law and Business Ethics
TEACHING SKILLS: PRACTICE ASKING QUESTIONS THAT
FACILITATE UNDERSTANDING
Practice asking questions encourage
the reader to:
“Reduce” the document they are
reading.
Use these questions as models:
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Evaluate reasoning.
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Consider an unfamiliar idea.
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Why should I care about this issue?
What is the author’s conclusion?
What is the author's reasoning?
How does the author's argument relate to the
broader issue at hand?
What terms in the author's argument should be
clarified?
Could this argument be a metaphor for a more
abstract issue?
What sort of reasons does the author use to prove
her point?
Are the reasons stated in an engaging manner?
Is the author using statistics, surveys, logic, or an
appeal to common sense? What does each of these
methods fail to take into account? How important is
that omission to the determination of whether you
should accept the reasoning?
Is the argument well-constructed? Is it well written?
Does the author claim any absolute truths? If so,
what?
Does the author identify any deficiencies or flaws in
her arguments, or does she present the reasoning as
flawless?
Does the author acknowledge the "other side"?
How dedicated is the author to her conclusion?
Does the author present the possibility that she is
wrong or misguided?
Does the author justify her assumptions?
What assumptions (related to the particular
discipline) does the argument support and/or call
into question?
What are the major tenets of this belief system?
That is, what aspects of other belief philosophies
does this philosophy accept?
Is this system of beliefs an extension of another
system? A reaction to another system?
What are the key "terms" involved with this idea?
How are these terms defined?
What are the various perspectives or approaches
within the system?
What are the goals of the perspective/approach?
What is the appeal of the argument/ perspective?
What kind of assumptions does the belief system
make about human nature? Are we responsible?
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in
whole or part.
Chapter 01 - An Introduction to the Fundamentals of Dynamic Business Law and Business Ethics
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Investigate the author/expert.
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Probe our individual understanding or
knowledge.
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Lazy? In control? Out of control? Reasonable?
Ignorant? Good? Evil? Self-centered? Othercentered?
What evidence supports this perspective?
What kinds of relationships exist between concepts?
Is there a major conflict between two dominant
perspectives, or do many perspectives disagree?
Is there a common thread among the perspectives?
Can we come to a conclusion about the issue based
on various perspectives?
What factors confound the issue and prevent a
concrete answer?
Who is the author, and where is she "coming from"?
Has she had sufficient experience and expertise in
the subject?
What (if anything) has the author stated in the past
that may confirm or contradict his current
argument? If the latter is the case, what factor(s)
warrant this contradiction (i.e. change in ideology,
pursuit of material self-interest, etc)?
What is the author's intent for writing this piece?
How does the author intend to persuade her
audience?
Do I agree with her rhetorical devices?
Is the author trying to be ambiguous or non-linear
for a purpose?
Does the author acknowledge the "other side"?
How dedicated is the author to her conclusion?
What stakes do the participants have in the possible
outcomes of the discussion?
What value assumptions do those participating bring
to the discourse?
What are the dominant paradigms the writer
subscribes to?
What do other reasonable scholars have to say about
the idea?
Who are the experts on this particular issue and
why?
Are the experts’ opinions based on a particular
belief system or is it an independent opinion that
deals with evidence that the expert feels is relevant?
Is the expert defending a particular belief or making
an honest attempt to come to an appropriate
conclusion?
What do I already know about this issue? How can I
connect this information to new knowledge?
Where am I "coming from"? How do I fit into the
author's view of the world?
How do I feel reading this? Angry? Amused?
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in
whole or part.
Chapter 01 - An Introduction to the Fundamentals of Dynamic Business Law and Business Ethics
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Offer closure, e.g., where does this
idea take us?
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Ambivalent? Why do I feel this way?
What is the best possible argument you could
construct against the author's conclusion?
Do I understand this idea well enough to teach it?
Can we accept the author's conclusion? To what
degree? With what stipulations? What should we do
afterwards?
Would another epistemological approach yield a
drastically different conclusion?
Have we kept reasons and conclusions separate? In
other words, have we acknowledged that we could
agree with the author's reasoning, but nevertheless,
could not endorse her conclusion? Have we
admitted that we might agree with the author's
conclusion but are not satisfied with her reasoning?
5. TEACHING IDEAS
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a. Connecting to the Core
Consider asking students to keep a “Connecting to the Core” journal. Throughout the
semester, students can relate concepts they are learning in their business law class to
material they are learning in their other business courses.
Ask students to take one particular area of law (Use Exhibit 1-1 as the basis for topic
choices) and write a paper that explains intersections between a particular area of law and
at least one functional area of business. For example, a student could choose consumer
law and write a paper that links a specific consumer law issue to content from their
marketing class.
b. Teaching Basics
Explore web sites that offer information about teaching at the college level.
Harvard has a great center. Their center links you to other centers. If you are a new
teacher, make sure you look at this site’s sample syllabi.
http://bokcenter.fas.harvard.edu/icb/icb.do
This syllabus tutorial at the University of Minnesota is great—it tells you all the subject
matter has sample language you can use.
http://www1.umn.edu/ohr/teachlearn/
c. Advanced Teaching
Use the Case of the Speluncean Explorers to explore the schools of jurisprudence. This
hypothetical case explores the dilemma a trapped team of five spelunkers faces when they have to
decide whether to eat one of their party in a quest to survive. Once rescued, the case considers
whether the surviving spelunkers are guilty of murder.
You can get a copy of the case of the Speluncean Explorers through this web site:
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in
whole or part.
Chapter 01 - An Introduction to the Fundamentals of Dynamic Business Law and Business Ethics
http://en.wikipedia.org/wiki/The_Case_of_the_Speluncean_Explorers
Once you get a sense of the case itself, explore further to see what kinds of questions you can ask
in class.
http://www.earlham.edu/~peters/writing/cse.htm#assignments
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ANSWERS TO QUESTIONS AND PROBLEMS
Private law involves disputes between private individuals or groups. Public law involves
disputes between private individuals or groups and their government.
Natural law provides that certain ethical laws and principles are morally right and “above”
the laws devised by humans. Legal Positivism assumes the legitimate political authority
deserves our obedience when it issues a rule. The theory of Identification with the
Vulnerable emphasizes fairness and looking out for those with the least power. The
Historical School emphasizes the use of traditions and stare decisis. Legal Realism
considers context such as social and economic conditions. Cost-benefit Analysis emphasizes
assigning monetary values to costs and benefits of the law in order to make calculations to
maximize the ratio of benefits to costs.
Although courts may interpret laws in different ways, not all interpretations of the law are
appropriate. Interpretations of the law and case decisions are considered appropriate when
they obey stare decisis, and rely on precedent with similar fact patterns. If all interpretations
of the law were appropriate, then case decisions would never be overturned in higher courts.
Methods of interpretation include natural law, legal positivism, identification with the
vulnerable, historical school, legal realism, and cost-benefit analysis. Depending on your
political preferences, you may resonate with a specific school of legal interpretation.
While it is best for a business manager to consult a lawyer when making important business
decisions, it is still essential that a business manager or entrepreneur have a general
awareness of potential legal issues. This awareness will enable the manager to have
background knowledge of legal conflicts that could develop during common business
activities, such as financing capital growth, selling to consumers, and complying with
government rules.
Critical thinking used in the setting of business law allows for improved evaluation of
business law arguments. Improved ability to evaluate business law arguments permits
stakeholders to make decisions that lead to more business success.
The interests of the public are protected and upheld by local, state, and federal regulations.
These sorts of regulations are created and enforced by the government. As such, public
laws, or the interests of the public, are identified with the behavior of the government, not a
private body, such as a corporation.
8.
Constitutions and statutes are not able to cover all the detailed rules that affect government
and business relations, therefore we need administrative law. Administrative law is special
in the sense that it fills in the particular details that are missing from these constitutions and
statutes.
9.
For example, environmental law in China is somewhat different from environmental
law in the United States. Unlike in the United States, China has a legal system
wherein polluters bear the burden of disproving that they have caused environmental
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distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in
whole or part.
Chapter 01 - An Introduction to the Fundamentals of Dynamic Business Law and Business Ethics
harm. Additionally, environmental claims in China are less likely to be resolved in
court, as China has a tradition of mediation over litigation. Most environmental
claims that go to court in China involve tort compensation, similar to U.S. litigation
standards before the creation of particular environmental statutes. Despite these
differences, there are some similarities between the two countries, such as China’s
Environmental Impact Assessment (EIA) law, which is similar to the United States’
National Environmental Policy Act (NEPA).
10. Employers to have a duty to respect the religious beliefs of their employees. They
do not have to respect employees’ non-religious beliefs. So, the question here is
whether Friedman’s veganism was a religious belief. Friedman argued that his
belief that it is immoral and unethical for humans to kill or exploit animals is a
religious belief. The court disagreed. Veganism does not “address fundamental or
ultimate questions such as the meaning of human existence and the purpose of life,
the beliefs were not comprehensive, because they did not derive from a power or
being or faith to which all else was subordinate, and no formal or external signs of a
religion were present.” The court viewed veganism as a secular philosophy and
would not protect it.
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© 2019 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or
distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in
whole or part.